What if China closes the VPN window in its 'great firewall'?

Amid reports that China is ready to block non-approved VPN (virtual private network) services, how will the industry be impacted?

What if China closes the VPN window in its 'great firewall'?

Life inside the great Chinese firewall presents something of a paradox. Despite living in the world’s fastest-growing cashless economy and enjoying mobile conveniences that aren't available elsewhere, people who want access to sites the rest of the world takes for granted, including Google, Twitter and Facebook, have had to employ VPN (virtual private network) software. Running a VPN imposes a speed penalty, and can be unreliable, but for a long time VPNs have given those with the means and the patience the ability to tunnel through the firewall and commune with the rest of the world.

Today, however, it looks increasingly likely that those tunnels may collapse. The government recently seemed to affirm that it will block overseas VPN providers by the end of March. This followed the Ministry of Industry and Information Technology's announcement in January 2017 that all special cable and VPN services would require government approval—part of a 14-month cyber sovereignty crackdown. In July, Bloomberg reported that China's telcos would be directed to ban VPN use, and Apple removed all VPN apps from its Chinese app store (although some seem to have popped back up).

No panic

While large companies should be able to continue providing their employees with a way to peer through the firewall using actual private networks, as opposed to "virtual" ones (see box below), news of the looming ban rattled private users, as well as academics and smaller businesses that rely on VPNs to 'fan qiang'—get around the firewall. That said, at least some China-based members of the marcomm industry are taking a wait-and-see attitude.

A regional communications director with a multinational agency based in Shanghai said she and her circle initially feared the worst. Contacted a few weeks later, she brushed off her initial alarm, saying that naysayers should wait until it "really" happens. She uses a VPN both at work through her office network and on her mobile from a free provider. 

Rather than a VPN-apocalypse, Bhasker Jaiswal, managing partner at OMD China, believes any move from the Chinese censors is likely to be gradual rather than drastic.

As an 11-year China veteran, Jaiswal has lived through the early Chinese internet ages when Google and Facebook were freely accessible. Today, although using WeChat has become second nature to Jaiswal, certain restrictions on information access still irk him occasionaly. “You cannot be loyal to one media, because you won’t know whether the New York TimesThe Guardian or BBC will be blocked, especially during the sensitive periods,” he says.

On the VPN ban, Jaiswal is more optimistic: “In the last few years, there’s always been rumours that it will stop, but we have not seen it happen,” he says. He added that the move by Apple earlier this year to transfer its iCloud operations to a Chinese data firm in fact received more attention. 

Bhasker Jaiswal

Freedom of information

Access to information unfettered by Chinese censors is highly valuable in strategy planning. “The biggest issue is the source of the information, because for us, our business is based on data intelligence whether it is in strategy or creative," says a vice president of operations for a Chinese independent agency, who asked not to be identified. "We definitely need outside information to develop a well-rounded viewpoint.” 

Tom Doctoroff, senior partner at Prophet, agreed that without VPN access, professionals in China are at an informational disadvantage.

"In China, the access to global stimuli from a creative development standpoint is slow and cumbersome," he says. "The government’s squeeze on access is a major hindrance for the comms and marketing industry to reach global standards." 

The unnamed VP agrees. “What I can find from Baidu search is low-quality information, and less reliable, incomparable to Google and what’s on The Economist and McKinsey reports.”

The Economist’s site was banned in China in April 2016 after the magazine published a cover illustration of President Xi Jinping in an unflattering light. An unconfirmed report recently said market intelligence service Warc was temporarily blocked in China.

China internet and social media usage data from We Are Social and Hootsuite's Digital in 2018 report.

“Nobody knows what happens, the whole thing is beyond our understanding,” says Jaiswal on the many sites that are censored. 

Even for publications that are not banned, accessibility to non-Chinese sites is hampered by slow speed. “Data intelligence from outside sources is essential for planners, no matter whether it is a foreign or local brand that we are servicing,” says the unnamed VP. “For example, in FMCG, you can’t just focus on the development trends in China. What is happening in other countries can be a guide for the Chinese market.”

Jaiswal sees things a bit differently. While foreign references are definitely helpful in strategy planning, he says the bulk of data in his strategising work for the domestic market runs on data from Chinese vendors and suppliers. “Most of our data came from Nielsen China, admanGo...they are all Chinese companies or joint ventures. I don’t see how our work will be impacted.”

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Big company impact?

Some international companies and organisations recently told Financial Times that internet access through their corporate VPNs had been disrupted over recent months.

The latest official update from a joint conference by China Telecom, China Mobile and China Unicom, held in Beijing on 10 January, stipulated that MNCs are required to use VPNs and communication lines provided by the state-backed telcos. 

While some would argue that a VPN provided by the government is in no sense of the word "private", others don't expect the government to interfere with business to a great degree.

"For those agencies that are not worried about a VPN crackdown, I assume they have a private network that is not going to be affected because they are not using the internet, but a private WAN [wide area connection],” says Steve Garson, president of SD-WAN-Experts, a US-based telco and WAN consulting firm.

Several technical options exist for corporations to circumvent the firewall using a WAN. The minimum cost of setting up such a network is about US$2,000 a month, and Garson claims his company has helped overseas companies from the manufacturing, law and adtech sectors set up such networks for their operations in China.

In a blog post published on Network World in early January, Garson wrote about which of the various technical options would be impacted by the supposedly impending Chinese crackdown. The post caused a stir, leading to a denial from China Telecom that such traffic would be blocked, according to a Global Times report.

“It’s a practical matter," Garson says. "The government may be realising that this will have a big impact on businesses, and let’s face it, you don’t want to interrupt the wheels of commerce". So far, feedback from Garson's clients has revealed no disruptions. “My guess is the primary focus of the crackdown is on consumers rather than business ISPs,” he says.

Chris DeAngelis, general manager from Beijing-based Alliance Development Group, which advises companies on China market strategies, concurs, saying that the crackdown is more likely to affect VPN service providers.

“It’s not going to dramatically affect the way business is done," DeAngelis says. "It can be affected, but every day something gets better and something gets worse. In many ways, the internet has a lot of restrictions that are annoying, but it’s faster than it has ever been.”

For his part, Doctoroff adds that there are other issues the industry could and should focus on. Lack of access to global sites is "nowhere near as great a threat to higher standards than the rush to ecommerce and KOLs as a false salvation", he says. “The role of online transactions here greatly overshadows even ecommerce in the US, and it’s extremey discounted, so the margin pressure is high on agencies to convince companies on the need to brand build.”

Many experienced in China have a practical way of accepting the way things are with respect to government regulation, even when things change quickly.

“It does not matter as long as I can assess what I need to, and those are usually not sensitive topics," says the unnamed VP. "Even for the things that I am seeing through VPN now, I am not certain whether it has already been censored, because I have never verified otherwise.”

So while the worst-case scenario casts the advertising business as collateral damage from the VPN crackdown, OMD China’s Jaiswal remains sanguine. “Most of the time, China offers you opportunities versus some restrictions," he says.

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